then why settle for slow internet? comcast business. built for speed. built for business. ♪ guy: good morning, you are watching bloomberg markets. the european open. first they -- trade of the day. i am guy johnson. matt miller is in berlin and this morning. a truck kills 12 at a berlin christmas market. the german government says it was probably a deliberate attack. how will angela merkel respond? russia's ambassador to turkey is shot dead in anchor -- ankara. the shooter shouted don't forget

aleppo. how will this affect the fragile -turkey relationship? a strong dollar, not a weekend. -- week yen. after a year of monetary effort -- acrobatics, is it the fed in the driving seat? matt? matt: a violent attack last night. a very populated and famous spot for shoppers, both germans and tourists alike. definitely a lot of emotion flowing throughout berlin last night. but of course, we have to remember there were also some sort of attack in zurich. mosque,hot there in a as well as the shooting in turkey. a lot at once for us to deal with geopolitically and for the markets to digest as well. guy: certainly a lot to think about. it leads to thinking about what is going to happen next year.

live pictures coming to you from berlin. we will be crossing back throughout the program to a you as events unfold in berlin and and the wider picture as matt said. it hold range of issues for us to deal with in the markets to pricing. let's talk about how markets are reacting to what we are seeing at the moment. the futures, the fair value in europe, we have turned positive over the last few minutes. the european markets, once again, we see this time and again, increasingly with terrorism. the markets simply getting used to these, they are becoming a popular narrative. they look through them. let's show you what is happening on the gmm. as is the picture. the japanese yen down as we watch what is coming out of the press conference. we are looking at fairly big moves associated with what the chinese authorities are doing with the clampdown on leverage.

it is rippling through the chinese bond market and flowing into some of these commodity markets, which have become speculative faces over the last 6-9 months. zinc an area you need to pay attention to. again, a lot going on in asia but the focus firmly on the terrorism incidents taking place in europe. matt: absolutely. i have the manager for bloomberg news in germany, chad? you were here late into the night and early this morning. do you think the question is who did this and why? >> that is the main question. have one suspect in custody. there was another individual in the vehicle that rammed into the crowd. that person is dead. we don't know much first -- about the person they having questioning. authorities said they will have a press conference at 1 p.m. -- 1:00 p.m. local time. we will learn more at that time.

right now, we don't know very much. some german media have been reporting on the identity of this individual, we do not know anything officially yet from authorities. matt: that is the primary concern. then,condary concern is how does this affect and love merkel? --we her from her wisdom or do we hear from her? we don't know if she is going to speak today. she has no scheduled appearances. it seems likely she will. probably likely she would speak after authorities give an update on their investigation. this populist party that has been very strongly anti--immigrant or anti-immigration, they were very quick to come out on twitter last night and on facebook accusing her of being responsible for these deaths. that got some strong feedback

from other mainstream political parties saying it was grotesque that they would do that. but obviously, they have this populist party that has jumped on that. matt: we are hearing comments from other politicians, the polish head of finance for the ruling party saying this is why they didn't pursue that kind of open door policy. merkel has already started to backpedal on this. --this cd you are part tied she said the cdu will attempt to out law the wearing of full faced bales. your policy is not something she is talking about in the same way that she did a year ago. she recognizes people in the public are concerned. were these four unrelated incidents over the summer that really unsettled people and her party has taken the hit in the

polls. it has bounced back a bit in recent weeks, but she is very aware of the concern that is there in the german public. guy: can i ask a more basic , it was, which is flagged by security authorities, the christmas markets were a .ikely target how much blame will be pointed at the security services in germany not doing enough to protect the people at the market? that is definitely a very good question. theread flagged that and have been quite a few arrests in germany of recent weeks of people they said were suspected terrorists or people they suspect are planning something. the questions will be unfolding this, how did they miss given that they knew there was something in the works, suggesting that venue in any way that -- what would happen at

this market, but they have been monitoring across the country and made arrests as well. guy: chad thomas, thank you very much. the ongoing coverage, the rest of the team in berlin putting in the hours to make sure our customers are fully up to speed with what is going on in germany right now. we are joined on set in london. yogi, the markets sensitive in their stride. european futures positive at this point in time. is that the risk -- right response? >> probably. this is very sad news, but from a market perspective, not likely to have an impact. german economy has done quite well. the euro has weakened significantly. the market is doing ok. 6%.ployment only at it is unlikely to have a big impact on sentiment, but it can

start to change things. let me counter that a little bit. politics has been the defining factor of 2016. he have seen it with the united states, with brexit. this is why i asked the question. is the market overly downplaying this incident. i'm sure people are connecting the dots between berlin right now and what happened last night and extrapolated forward into the european elections next year. but these are the kinds of events that shape those elections. immigration standing out as a in this story potentially. we don't know yet, but the markets are drawing some conclusions and the papers in germany as well. between brexit, donald trump, immigration and 2017.orward into 2016 -- should the market be so calm about what is happening? ignores these views, it seems to be made --

big media story. but from the market sign -- side, focus has been on currencies. it is corporate office that drive share price appreciation, not geopolitical events. as we have seen markets play out, corporate profits seem to have done well, fiscal policy, thetary policy comes to mainframe. these all spill over into profits. not the news we are seeing around protectionism, geopolitical events and election results. that is what is driving markets towards highs. maybe the trump rally is a bit overstated. maybe events from brexit are overstated. what translates into corporate profits, that is what investors seem to be focused on. matt: we typically see a santa claus rally into christmas, the last week here or the last week before new year's eve. ,o you think that this year people are going to be in the mode of taking money off the table because we are ready had such a big rally?

>> this is going to be thin volumes in them run-up. we can't help but think this last week you will more likely see a cautious market and investors taking money off the table, ready for repositioning in q1 2017. that is what we are doing for the portfolios we manage. guy: thank you for sharing your time with us. he will be with us throughout the program. coming up on the show. and the curve control strongest yen since 2013, a year of extraordinary policies from the boj closes with finally a quantity of economic outlet. the latest from the central bank, european markets open, and merkel's response to berlin.

politics front and center once again. this is bloomberg. ♪

matt: well connected the european market open. matt miller from berlin. you are looking at the brandenburg take.

just down the road on the other side of berlin's main park is church that was war-torn at the end of the second world war and left that way. near this church or surrounding it last night at a christmas market, there was an alleged attack where a truck drove through the highly populated christmas market and killed at least 12 people, injuring almost 50. police have opened a criminal investigation into this and have .t least one suspect in custody the alleged driver of that truck. no more details have been officially confirmed. a couple newspapers are reporting that the suspect is a pakistani refugee. if this were true, it would be even worse for angela merkel, this horrific situation must be for the chancellor of germany.

massive human tragedy and could turn into a real political tragedy as well. we will cover this and the events that happened in zurich. people were shot there last night and in turkey, the russian ambassador was shot that in turkey yesterday as well. let's go to juliet with your bloomberg first word news. president putin has called for a crackdown on terrorism after the russian ambassador of turkey was shot dead. he was attacked at an art exhibition in ankara. the gunman who was shot by security forces shouted don't forget aleppo after the shooting. the kremlin said the attack was an attempt to undermine russia-turkey ties. a manhunt underway in zurich after a suspect shot people an islamic center. three men were hospitalized after the attack close to the main train station.

the dead body of another person was found a few minutes walk from the scene, although it is unclear if the two episodes are linked. the pentagon says that china has returned a u.s. navy underwater drone. the unmanned vehicle was handed back close to where it was seized last thursday. the incident triggered a diplomatic spat between the two nations, donald trump took to social media to criticize china's actions. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. guy: thank you. an extraordinary year in so many ways, but the monetary policy arena has been front and center for the markets as they try and understand where we go from here and whether or not we are making a big shift towards a fiscal policy dominance outlook in 2017. in january, the central bank, the boj took negative interest rates.

the currency peaked this summer breaking below 100. the boj introduced elusive concept of curve control. since november, we have seen the yen in freefall with the dollar gaining more than 13% against the yen. the rate of change has been eye watering. the boj closed its year with an upward economic outlook while keeping yield curve unchanged. it has been quite a year. let's talk about again. -- about the yen. this weakening of the dollar, strengthening of the yen as we work our way through the back end of last year into the bulk of this year. then this amazing move to the upside. rates have changed their. too far too fast? >> absolutely. fiscal spending, unlimited bond

buying, markets rallying 8% on the back of this. the yen has just depreciated and depreciated. we are some 15% on the value -- the ppp basis. too much too quickly. we expect to see some yen strength in the run-up into q1 2017. guy: what level? >> hard to say, but we won't be surprised to see levels we saw earlier on in the year. things to remember about the japan, it is dependent on china. china is dependent on the u.s. dollar and trump issues as well. what has been happening in japan as well as the domestic story around monetary policy and fiscal policy has been impacted by the strong dollar and what is going on in the u.s. indirectly impacting china. get --sn't this yen we weakness great for the boj? doesn't this lead to inflation

which is what they have been chasing all these years? >> absolutely. this is great news for japan. this was reflected in the commentary we have seen overnight as well. we have a market that is now growing. we have signs of inflation in japan as well. ,verything seems to be working we are positive what is going on in japan and would like to go long japan into 2017. i think it is one of the great areas to invest right now with yen weakness we have seen. matt: i only ask because our survey of economists suspect the governor to leave everything unchanged, even through 2018 when he steps down. is there any chance of a turnaround or a path to normalization for japanese monetary policy? -- dole they have a unlimited bond buying, this makes a lot of sense. we are starting to see inflation come through.

shoes, i in their would do the same, which is nothing and let this layout. it has momentum. a lot is dependent on what happens in china and what also happens to the u.s. dollar. but you will start to see the yen strength in because it is so oversold in this environment. guy: how much of the private markets can japanese authorities by? i think that will continue. the pension fund is underway, equities need to keep buying. guy: that has to be bad for innovation, bad for corporate governance. --t is the second directive negative on this? yogi: i wouldn't think of it like that. i would go back to earnings. orientation that the economy has domestic growth we are seeing.

it is earnings that drive share price depreciation. all factors you have mentioned will have an impact and at volatility, but you have to go back to earnings, price to earnings ratio. matt: thanks for that. he is going to stay with us throughout this morning. volatility as markets open in about nine minutes. up next, we are going to get to the open, we are going to figure out exactly what this geopolitical unrest means for asset classes around the world. this is bloomberg. ♪

matt: welcome back to the open. six minutes to go into the start of trading. here you see the brandenburg gate in berlin. the city, the capital of germany was the site of a suspected terrorist attack last night as a drove through a christmas market at the good -- mr. share, the famous church that was scarred by world war ii at the head of the most famous shopping .treet in germany normally packed with locals and tourists. 12 were killed, 50 were injured in this suspected attack. the police have one man, at least one man in custody. so that is the set up this

morning as we going to the market open. right now, we see buying in --asuries, buying in bones now a little buyings, right down 31 hundredths of 1%. the german yield down one 100th of 1%. gold off about 329--- not a lot of movement here. not a lot of premarket activity. lookinge again, markets for a story in europe. once again, you see that happening. the other thing of want to flag as well is what we saw over the last 24 hours in the turkish lira, the killing of the russian and it are in ankara having an effect. this is the markets reaction. fragile relationships in this part of the world and this is

going to be a factor in that. we will discuss that as we work our way through the open and into the rest of the program. london also in shock this morning as we watch events on the continent. this is bloomberg. ♪

guy: good morning. i am here in london. matt miller in berlin. we are moments away from the start of morning trading and matt has your morning brief. truck kills 12 people at a christmas market in berlin. the german government says it was probably a deliberate attack. how will angela merkel the chancellor, respond? ambassador to turkey is shot in the back, dad in ankara. turkishter, who was a police officer shouted "don't forget aleppo." how might that affect the fragile russia-turkey relationship?

plus,plus, it is a strong dollat a weekend. the boj raises the monetary outlook. but in a year of acrobatics, is it the fed in the drivers seat? at how european markets are opening this tuesday morning. we are not expecting a great .eal of a change in direction and an a in equity markets today. the ftse 100, north of 7000, but likely to remain close to the down less than 0.1%. he will let the market do its business. we will see itself and maybe a little more than this. lookingless, we are not for a clear sense of direction. a lot of liquidity is going to start drying up. we are going to see these markets become a little more opaque in terms of price discovery. there is the cac, opening a little softer this morning. with the details of these markets, here is manus cranny. day to you. what markets are trying to deal with is the juxtaposition of

geopolitics and the economics. think of what governor yellen had to say, and governor kuroda. function.our gmm the end continuing to drop. that is at the top. on the pylon, the bloomberg dollar index. you can see it is nontraditional, a non-classic response by the market to the political events, the geopolitical events in germany, in zurich, and in turkey. the markets at the moment remaining reasonably steadfast in their belief that economics will drive or usurp politics at the moment. this is the complexion in terms of the areas we are seeing. , focused againi on financials. it looks as though italy is willing to put -- to take on a little more debt to sort out financial issues. want to draw your eye line to the yield curve in japan. --re do we go next quote

where do we go next? your bloomberg ticker will help you understand the movement in the yield curve. tells the markets it is too soon to reconsider moving target on the longer-term. there is a corridor of tolerance. our guest on "daybreak" told us this morning. making the point that may be a weaker yen is a result of the current moves by the bank of japan. stocks little unsure. dollar-yen is trade neutral. nejra cehic is with us. good morning. nejra: you are off the radio. i have just come from radio. one of the stories we broken the last hour i am watching now is lloyd's buying bank of america's u.k. credit card union for $2.4 billion, 1.9 billion pounds. this is in cash as lloyd's looks to expand in consumer finance. the deal is 650 million pounds to lloyd's yearly revenue.

i amther banking stock focusing on as well as credit suisse. according to reports, and may reach an agreement as soon as this week to settle a u.s. investigation into its handling of mortgage-linked securities before the 2008 financial crisis. the stock looks like it was a little weaker at the open. but i am also watching these luxury watch companies. they were called higher at the mont not quitee reacting as expected after swiss watch exports declined in december. some people seeing this positively because the decline is not as great as it was in october. guy: russia's ambassador to turkey has been shot in ankara in an assassination apparently linked to the war in syria. president vladimir putin announced the attack, saying it is an attempt to undermine ties between turkey and russia. president clinton: the crime is undoubtedly -- president putin: the crime is undoubtedly

targeting the peace process in syria, which is actively promoted by russia, turkey, iran, and other countries interested in the regulation of inter-syrian conflict. there is only one possible response to this -- the strengthening of the fight against terror. guy: vladimir putin speaking after the event. for more, let's get out to istanbul. how are the authorities responding in turkey to what happened in ankara? reporter: shocking events here in turkey. late last night, the russian ambassador to turkey andrei karlov being shot dead at an art exhibition. the shooter, a turkish police officer. right after the event, president ,rdogan called president putin and they both spoke and agreed they will not let this assassination ruling ties. of course, turkey and russia fell out in a big way in late

2015, when turkey shot down a russian jet on the syrian border . of course, that was followed by trade and travel sanctions. now, today, the turkish foreign minister will be meeting with the russian and iranian. let me add that this was a prescheduled meeting. -- meeting in order to discuss the situation in war-torn syria. we will be following the elements from that meeting. matt: what do we see as far as market reaction goes? simin: after this incident took the lirae last night, slid against the dollar. it depreciated around 0.7 percent. today, it is one of the best performers in emerging-market currencies. overall, the lira has been hitting record lows over the past month. external factors in play there,

like the u.s. election. but we're also seeing political unrest in turkey over the past few months, especially after the failed coup attempt in july. in turkey has been in a state of emergency ever since. the lira has been hitting record lows, as i said, and the dollar has strengthened 15% over the past three months. guy: simin, thank you very much indeed. joining us in istanbul. this turkey part of your portfolio? guest: it is not. the gdp of turkey is around 700 million, just marginally bigger than apple computers. you have to keep it in perspective. it is a worthy news story because of geopolitical events. obviously, the currency has had a massive depreciation. we are expecting three interest-rate hikes over the next year. but this is a consequence of its problems domestically and a stronger dollar. guy: a very similar conversation to what we had at the top. you are basically saying, you

have to look through this. yogi: you have to look through this. it is not a big enough economy from an investment perspective for big, institutional investors , pension funds in the u.s. and europe. you need to focus on broader emerging-market economies where investment is inexpensive. matt: sorry, yogi. i wonder what you think about the possibility of, or the market reaction of, selling bonds and selling gold here. shouldn't people be buying protection this morning? yogi: you know what, the news flow that we have seen around germany, around switzerland, and also around turkey is really disappointing and very hard to hear, especially in the run-up to christmas. that again, it is not a driver of financial markets, especially on such light volumes. investors will look at fundamentals. they will not get -- not look at geopolitical events in this environment, as status the

stories are. if you look at what is driving markets at the moment, it is currencies. currency seems to be driving things forward. earnings as a consequence. that is what investors remain focused on. matt: you mentioned fundamentals. the fundamentals as far as germany are not bad right now. but we do have some week fundamentals as far as the peripheral european countries. i am thinking obviously of italian banks as well. how would you waive the fundamentals of europe? yogi: europe is fascinating at the moment, and this is what we consider to be one of the best areas to invest in, 2017. germany seems to be in good shape as you said. good gdp growth numbers, comfortable unemployment figures as well. germany is trading and benefiting from a week euro. euro.k the italian banks having problems and it wobble in the run-up to the french election may cause currency volatility, but the beneficiary will be germany. consequently, we like germany. guy: just germany?

yogi: as far as we're concerned, all of europe looks ok. volatility around italian banks is a can earn. french elections coming in april is a concern. but the weaker euro benefits germany more than any other country. guy: how week do you expect the euro to come? yogi: it is already 22% undervalued versus the dollar. so we cannot see it weakening much further. guy: you do not believe the parity calls? isi: if it happens, it momentum and sentiment driven, not fundamentals driven. i am not going to say it cannot happen, won't happen. exactly.at traders -- but from a fundamental perspective, we should not be down to these sorts of levels. the big beneficiary of this, germany. remember, valuations in germany are quite attractive relative to the rest of the world. it is a good place to park your money for equity exposure in the run-up to 2017 and beyond. guy: yogi, thanks for your time

thus far. dewan is going to stay with us. a manhunt is underway in switzerland after an attack on an islamic center. we take you like to direct. then, the boj says things are looking up after a tumultuous year. we dig into japanese policy announcements and ask markets see next. do they agree with the boj? eventshe implication of in berlin for angela and the political landscape in germany. ♪

matt: welcome back to the european market open. just a quick check on how markets are trading after a terror attack -- an alleged terror attack, i should say, in berlin last night. the police are saying it is likely a deliberate attack after a truck drove through a christmas market and killed 12 people. here, you see equity markets at least trading up. here in germany, the dax gaming sewer .1%. in paris, attack is up 0.2%. is up 0.2%. the cac guy: some of the miners are a little softer, which accounts for why london is underperforming a little bit. land-gold is trading a little softer this morning.

you are seeing some weakness creeping into some of the mining stocks, gold-related. that will have an impact on the ftse. as far as the gainers, watch what happens with media set and the ongoing story of control and politics in the mix, and a slightly tangential way. unicredit is trading well this morning, as are some of the other italian banks. unicredit up, having an impact on what is happening in italy this morning. to theturn our attention big story since november, president-elect donald trump. weighing in again on twitter. turkeyin berlin, zurich, , this time the subject of his attention. he took to twitter, saying, today, there were terror attacks. a civilized world must change thinking. do we all need to change our thinking in terms of the way the united states is going to interact with the rest of the planet?

certainly,t protectionism is here to stay. it is effective in brexit and i suspect will be throughout europe. it is firmly implanted in the u.s. coupled with that, increased fiscal spending and a stronger u.s. dollar. the dynamics have changed. dollar strength seems to be driving the market not just in the u.s., but also in europe and places like china. guy: to come back -- you have got the trade channel and the diplomatic channel. one is becoming more congested, the trade channel. looks like it will become more difficult to work through because of the protectionism story you are talking about. the diplomatic channel looks more difficult as well. again, come back to this issue of how i price in that risk. you said to me throughout the is a tragich, it event, but the markets are not going to take it and price it in. you talked about what is happening in turkey overnight. you said that to me. big i think about the geopolitical set pieces, what is happening in the south china

sea, how do i price that him? is that something i need to think about, china's relationship with moscow and the u.s.? how does that bigger picture of geopolitical narrative work? yogi: you have to take into consideration, but these issues around trade agreements and geopolitical events and tensions -- they have existed for decades, even hundreds of years. guy: for the last two or three decades, we have not had to deal with them in the same way we did in the cold war era, the postwar era, after the fall of the berlin wall. there was a significant change. we went into a multipolar world. it started to become -- it started to become more manageable, from a market point of view, or understandable from a market point of view. can you talk about that? yogi: absolutely, but stay focused on the domestic stories for the economies you are looking to invest in. in the u.s., look at the domestic story -- the gdp growth numbers, of over 2%. and onoductivity

implement data. lu asians are a bit stretched in the u.s., at 19.1 now. maybe take a breather and a step back. the world, rest of trade issues have been going on for decades. stay focused on the domestic story, in emerging markets in particular. you are starting to see a good, positive domestic story. you are seeing commodity stability. to thaty, the flip side is dollar strength, which has not help those economies. and obviously the trunk affect -- trump effect, with china as well. the domestic story will drive markets forward, not trade agreements and breaks it trade talks. that, to me, is just noise. matt: yogi, what do you think about investments in russia? as russian relationships with turkey seem to be strengthened by this assassination, the u.s. -- the u.s. relationship with russia seems like it can only get more positive under a trump

presidency. russia's foothold in the middle east seems stronger than almost any other nation there now, at least in the war-torn regions. and russia's inflation is being kept under control. russia's central bank seems to be on top of things. does it look good for russia? yogi: russia's sentiment is definitely improving. i agree with all the comments you have made. russia seems to be a play on the oil market. if you think oil price stability is here to stay or oil prices are going to increase, with the opec and non-opec country cuts seen as positive, that is good news. russia also seems to be a levered play on the european markets as well. if you think europe is going to do ok in 2017, russia will be a beneficiary of that. i think russia, with all the structural reforms that are taking place, the geopolitical events we are talking about,

probably looks more attractive than it has done. but russia, this last year, has been the best performing emerging-market out there. so you need to take that with a pinch of salt. guy: stay with us with the conversation surrounding the emerging markets. the focus shifting to china. we will talk about the bond rout, the clampdown on leverage. it is impacting a series of markets, including metals markets. we talk about that next. ♪

matt: welcome back to the european market open. here, you see a live shot of the christmas market, now destroyed by an 18 wheeler large truck, running straight through it last night, killing at least 12 people, injuring almost 50, at the scene of a very popular tourist site, a church which had been destroyed in world war ii and left that way as a memorial. also a very popular shopping area. the most popular shopping street in all of berlin. there are reports coming in from german newspapers and from the police, alleging that this was a terrorist attack, alleging that this was done on purpose, and also alleging that it is possible a refugee out of pakistan was involved.

i should stress that those reports have not been confirmed by the german government or by the german police, but the build german -- but two newspapers saying a pakistani refugee was at the wheel of the truck and is now in custody. guy: a story that will continue to dominate the news cycle. we will continue to update on what is happening, and how the political story unfolds in berlin and elsewhere around the world. i want to take you back to a conversation we were having just a moment ago, surrounding what is happening in china. you have seen this leverage clampdown in china, rippling through markets. we have certainly seen it in the zinc market. let me show you what has been going on in the chinese 10 year. as we have paid our attention to what has been going on in the united states and europe, and what has been going on in those bond markets, the chinese market really has been selling off aggressively. you can see this is from october, up to where we are now. we have gone from about a 2.6

handle to about a 3.4 handle on the chinese tenure. chinese authorities clearly feel they have to clamp down on leverage. that is having an impact into a series of markets. is this a place you can invest, given the volatility? yogi: of course it is a place you can invest, and $11 trillion economy, the second-biggest after the u.s. the msci world emerging markets is down 10%, or is up 10% year to date, and china is down 10% year-to-date. it is being driven down by domestic problems at the beginning of the year, but also by a strong u.s. dollar, because of the peg. the reality of the situation is, china is in good shape. it has tried to depreciate its currency to around 6%. the domestic story is a good story. valuations look reasonable. and commodity prices seem to be stable and on the increase. of course, we have global gdp growth. china is a big beneficiary.

you must have exposure to china in some form or another. guy: do you? yogi: we do directly and indirectly. directly, we have kept it minimal. indirectly, you have exposure when you buy global equity markets. every large corporation has some form of exposure to one of the biggest markets in the world. massive consumer market. matt: i just want to give you some breaking news here. we do now have confirmation that german chancellor angela merkel will make a statement today on the tragedy at the christmas on -- just off the could the christmas market in berlin. angela merkel will i get the angelamake arrests -- merkel will make an announcement as police make arrests, have suspect in custody, and start together intelligence. we will hear from the chancellor. yogi, i want to get back to china. i think it is interesting that the yuan share of global payments rose last month to 2%

from 1.6%. but a lot of onlookers are saying that is because businesses are trying to do as many payments in yuan as they can to get rid of this currency. doesn't that tell you something about the state of the chinese economy, when people do not want to hold on to currency? yogi: you have seen massive outflows driven by those sorts of issues, and also by the stronger dollar, with interest rates going up. i think the reserves diminishing and outflows from china is the concern, which is why the market is down 10% while emerging markets are up 10%. back to fundamentals, the reforms that are taking place. look at what is actually going on with trading around the chinese region, with japan and europe and the rest of the world. and the domestic story is a good one, when you look at domestic growth, as well. you must have exposure through china in this environment, in some form or another, into 2017. matt: yogi, thanks for joining us. wan coming to us on a

very difficult morning after a tragic possible attack yesterday in berlin killed 12 people. the chancellor of germany, angela merkel, will make a statement later today. ♪ generosity is its own form of power.

you can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues.

don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. matt: we are 30 minutes into the trading day. i want to point out you are looking at a live shot of the brandenburg gate. angela merkel, chancellor of germany, will speak today on the christmas market deaths yesterday. a truck driving through a christmas market, telling at least 12 people, injuring 48. the german police have started investigations here and have at least one suspect in custody. angela merkel expected to address all of those issues and give us an update later on today. let's take a look at how things are shaping up in the markets. not a lot of movement on this -- on this terror -- alleged terror

attack. we see gains in the continent. the ftse actually down. you mentioned the miners are week. that is what is driving down the ftse, although it is really little-changed. actuallynd the cac gaining this morning. let's get the first word news with juliette saly. putin hassident called for a crackdown on terrorism after the russian ambassador to turkey was shot dead. andrei karlov was attacked in an art exhibition in ankara. shouted "don't forget aleppo" after the shooting. the kremlin said the attack was an attempt to undermine russia-turkey ties. a manhunt is underway in zurich after a suspect shot people praying in an islamic center. three men were hospitalized after the attack, which took place close to the main train station. the dead body of another person

was found a few minutes walk from the scene, although it is unclear if the episodes are linked. the international monetary fund's executive board has reiterated its backing for christine lagarde after its managing director was convicted for negligence during her time as french finance minister. the paris court said she should have done more to overturn a multimillion euro payout to a businessman over his 1993 sale of adidas. lagarde will not face any fine or jail term. powered by journalists and analysts in more than 120 countries, this is bloomberg. guy: thank you very much indeed, juliette. the bank of japan has upgraded its assessment of the world's third-largest economy. on a take policy was kept unchanged in the central bank's donald trump's electoral victory. let us go live to shery ahn in

tokyo. give us the details of what was delivered today. to thewhen it comes japanese economy, the bank of japan did portray a more rosy outlook for the future. weak yen, we have a trading at around the weakest level since february. but when it comes to monetary policy, they kept it unchanged. economists by the 36 surveyed by bloomberg, no change. they maintained the policy weight at -- and the target yield. the number business investors were looking at -- as we see, global bond yields spiting. japan's 10 year yield has also felt upward pressure, rising to the highest level since january. , after are now seeing hitting that 1% last week, some analysts had been speculating whether this was the upper limit of the bank's tolerance.

governor kuroda saying the appropriate yield curve had been achieved and it is too soon to discuss raising the long-term yield target. but of course the boj says it will adjust policy as needed. when it comes to the weakening yen, the governor does not see the yen as excessively low. february lows. kuroda emphasizing that -- that everyone talked about a week it yen, -- the weak yen, but it is just the level in february. have some breaking news on the situation in zurich. angela merkel is going to speak later today because of what happened at the christmas market in berlin last night. now, the zurich police are going to hold a press conference later today as well, to talk about the shooting at the mosque. c.e.t.ll be at 1400 that is 1:00 p.m. gmt. get more on that

story. shery ahn, thank you. we will continue to monitor the story in tokyo with our bureau, but now with nicholas smith, equity strategy at clfa japan. good morning. you think that the japanese authorities can do any at this stage? i have to say, i listened to what kuroda had to say, or at least the translation. he sounded reasonably upbeat. this is as good a place as the japanese authorities could have expected to be at the end of 2016. nicholas: absolutely, it is. the economy really is in a goldilocks zone anywhere between 110 or ¥120 to the dollar. that is a great rate. you have pick up in the global economy. that is a lot more important than yen is for japanese companies. i think as far as corporate profits are concerned, we ought to see a very good year indeed in 2017. guy: how does policy developed

from here? is it just sit on your hands and do nothing, and wait for the fed and donald trump to deliver? nicholas: i think that there are some people out there who think there is going to be upward pressure on the 10 year bond. i think there is absolutely no danger whatsoever. i think we are basically into a lame-duck session now. between now and april 2018, when governor kuroda steps down, he has not really got to do anything. ofprobably ought to get rid the -10 basis points on policy rates, but won't. at he will leave the 10 year zero. there is really nothing else he needs to do. as long as people believe that the 10 year can be defended, it will not cost him a sent to do it. it is basically a draghi assertion. nicholas, how long are we

until there is an actual turnaround towards normalization in the bank of japan? or is that far past governor kuroda's tenure? nicholas: sure, way past that. the next thing is the end of 2017. we will be talking about who the next governor is. is consideredshi by most as the leading contender there. that is a very safe pair of hands. that a lot of decision -- but it is not a decision for corroded at all. if you ask staffers, they will say it is way too early to the skies normalizing rates. up inion will be picking the next year or two. we are sitting 1.2% at the moment. the headline rates -- the x energy, which we should have been watching all along -- that is sitting at about 0.4%.

nothing to really by our nails about. it's sort of gets to a couple of percent and there is no real need to normalize things. matt: nicholas, are you concerned about the death of the tpp, or the death of a sort of global trade, even as we hear that japan is now negotiating new agreements with europe, and abe is meeting with putin? does depend face problems because of that protectionist feeling around the world? or can they access new markets even through this protectionist feeling? nicholas: when you say protectionism around the world, obviously, you are talking about protectionism in the u.s. i do not think that trump will be signing anymore trade treaties. but then again, i do not think there will be a bonfire of existing treaties. if you look at tpp, remember the

most important sector for japan is autos and auto parts. on boths had 0% tariffs of those areas since 1978, chris of u.s. pressure. the u.s. has 2.5% on cars, 25% on trucks. 25 yearsould have been for cars, so a knot in my lifetime agreement. do much forgoing to japan. the main importance of it was atually domestic, inputting -- in putting abe in a position where he could look at agriculture in japan. it served the purpose of that. but there are other deals to be signed, outside in the rest of asia. people are desperate to get trade treaties done. japan, it's agriculture, it's average, has got one of the lowest tariff rates in the world and can sign a treaty with anybody and come out better

because of it. guy: nicholas smith joining us has been japan on what coming out of the boj this morning. what's recap some of the news we have been seeing over the last two minutes. we have a meeting between sergey turkish minister of foreign affairs. we are now hearing from the turkish side of the table, saying the russian embassy streets will be named after ambassador karlov following his shooting yesterday. countries appear to be trying to make very clear at this point that this incident will not affect the relationship, which had been strained over the last few years. will not affect those relationships. turkey condemning the assassination of the russian envoy. it had been strained, but they have become fast friends again. this looks like it has solidified, at least from everything we are hearing, from both countries, solidifying that

newly-found friendship, or newly-healed relationship. i want to talk quickly about angela merkel's response to the tragedy at the christmas market last night, here in berlin. she is going to speak. the chancellor will talk about ais truck driver through christmas market, killing at least 12 people at 11:00 a.m. local time, 10:00 a.m. london time. just about an hour and 15 minutes from now, we will hear from angela merkel on that. three hours later, we will hear from the zurich police about a shooting that happened at a mosque there last night as well. so we are going to get more information on all of these tragedies and geopolitical turmoil around the world, after the break. this is bloomberg. ♪

matt: just about an hour and 15 minutes now until we hear from german chancellor angela merkel on the probable attack that killed 12 people at a christmas market yesterday, and injured almost 50. the german police have apprehended a suspect in that behind me,ually just behind the brandenburg gate, as he fled from the scene. apparently, a witness from that attack watched him jump out -- allegedly jump out of the truck -- and then followed him down to the victory column in the middle of the beer garden -- in the

middle of the garden. there are newspaper reports that the german police force raided a refugee camp at temple half -- templehauf. we have to be careful. we can expect angela merkel to at least address some of these questions when she makes her statement at 11:00 german time, 10:00 u.k. time. guy: the other incident, the shooting of the russian ambassador in ankara last night. we now have a meeting at between the foreign ministers of russia and turkey taking place. we are getting comments coming through, the turkish side of the table talking about, we must uncover who is behind this hideous attack. as if does seem as if -- the two sides are trying to make clear that this will not disturb

their relationship, which we have been discussing has already been fragile over the last couple of years. the downing of the jet obviously front and center in the destruction of that relationship. the subsequent rebuilding of it has left it fragile. nevertheless, it does not seem like anything at this stage is going to change the situation between moscow and ankara. that is not the only incident. we had the incident in zurich as well. we will get statements later on that as well. gottennd we have already some information from the zurich police. there was a shooting at a mosque last night in zurich. apparently, another body was outside of the mosque. it is unclear whether those two things are connected. at the zurich police have said now they are not searching any longer for a suspect and the shooter at the mosque has been identified. they will hold a press conference at 2:00 central european time to talk about the

incident in zurich. it is 1:00 in the afternoon u.k. time. we are getting so much so we will try to keep you up-to-date. you can of course follow bloomberg on twitter as well as all of these global sources. i want to bring in the managing director at redefine, to consider the geopolitical implications of the incidents in turkey, germany, and switzerland, ahead of a big election year in europe in 2017. because i am here in berlin, let me start with angela merkel, the chancellor. is she under any threat because of what we are seeing here? or does this ultra-right-wing populist party, the alternative for deutsche land -- do they gain a stronger foothold, maybe a spot in the federal government, as a result of this? just: i have been living in berlin the past eight years and one remarkable thing has been how measured, and in a way incrementalist, mrs. merkel's

support has been to every single new crisis situation she has faced. i do not expect things to be different this time. she will be measured. she will call for national unity. she will call for beefing up security measures. but i think, given her position in the german political landscape, where there is simply other politician who is in any position to be chancellorto -- i think she can afford not to be drastic, and to actually have thoughtful measures, a sensible response, rather than the knee-jerk reaction. because no matter that this will trend, absolutely -- the vast majority of german votes will be cast for the mainstream parties, for the cdu, the spd, and the greens. in a worst-case scenario, you will have maybe a four-way

coalition. we are never going to come to that. it will almost certainly be a grand coalition again. matt: sony, you talk about drastic reactions. i was at the cdu gathering in essen a couple of weeks ago, when angela merkel called for a ban of the full-face veil. no longer allowing muslim women to wear this fullface veil. analmost seemed like it was attempt to almost outflank the asd, the right-wing party here. when you have got liberal democracies telling people what they can or cannot wear, don't you think that is a bit severe? sony: well, in any other country -- and given the examples we have seen in france in particular, what has been going on in austria and in switzerland -- this would not be considered

drastic. yes, you are very correct. for a country with germany's history, for a country which has been very, very careful not to tread into the territory of personal liberty and values, this was a drastic measure. and she was roundly and rightly criticized by liberal forces for that measure. ,ut i think that probably that and maybe a little bit further tightening of the already [indiscernible] is the most we are going to see, together with a real, much-needed sprucing up of german security services and intelligence, which has not quite got the same resources as the ones in france and the u.k. guy: just getting a line out of the zurich police in the last couple of minutes, saying they suspect the shooter in yesterday's incident is now suspected to be dead. we will have more details as we work toward the press conference coming up later.

this certainly will join us with more details at that stage. how does this play in france? because france is feeling much more fragile about what is happening with the terrorism story. it has suffered severely over 2016 and is now looking across the border into germany, looking at what is happening in germany. how does this play into the near-term french election? security a much higher profile story. sony: in terms of the actual outcome, i think that that is still likely to be a president fillon. but the relative share of marine e could increase. the relative importance of security issues, the relative importance of immigration, etc., could be much higher as a result of the berlin attack. every single attack that happens on european soil over the next few months will feed into the elections, will stoke up support for the far right. but more dangerously, will almost certainly lead to -- as

perhaps the zurich attack might have been -- reprisals against the muslim immunity. in this way lies trouble and conflict. we need to find a way of managing this. we will definitely have more attacks. but i think together, europe will manage to keep the far right out of political power. guy: let's walk back along the line. thierry remains in some ways the epicenter of this story. storyia remains the epicenter. we saw this incident where the russian ambassador was shot dead in ankara. when we look at how regional powers are playing the serious story and trying to make their voices heard, and impose their will on the ground, what does 2017 bring? if angela merkel is watching this story, if francois hollande is watching the story, they can trackback to syria. if syria stabilizes, does the situation in europe stabilize? or are we passed that point? how did the stories fit together?

our perspective, the situation in europe is not that bad. we are more than 500 million people within the european union. and if you look at a per capita basis, we remain the most peaceful part of the globe. and i think that is not going to change. you will see more headlines. we will see more attacks. and there are already, presumably, with the millions of people who came, and the large muslim community -- there are potentially terrorist cells. many attacks have been sorted already. but some will probably is to -- will probabilistically go through. there will be a timeline lag between the situation on the ground in syria and potential terrorist attacks within the e.u. boundaries. the situation in syria, sadly, is hard to see stabilizing in any possible way, any time soon,

at least in a matter -- in a manner that stems the flow of refugees. just because president assad manages to reestablish his hold on power, given his track record, that is going to push a lot of people out who would be targeted by the regime, as they have been. isthe consolidation of power not the same as stabilization of the situation in syria. it is not the same as the stemming of refugee flow. it is not the same as a reduction or elimination of terrorist attacks in the e.u. matt: sony, thinks for joining us. r, managing director of redefine. we appreciate you coming in on such a difficult morning. is whate merkel's dead, a member of the alternative party for germany treated after a truck ran into the christmas market, killing 12 people in what the government say was

probably a terrorist attack. our german editor joins us to discuss political implications of the incident heading into an election year. let me first ask you, what do you expect chancellor merkel to tell us when she talks in about an hour and five minutes? tony: i think what you are going to see is -- our best educated guess would be that she will obviously express horror and say that we need to stand up to terrorism, and that the authorities will investigate , and will take additional measures -- which is quite possible and might make sense. on the other hand, given her and her government's previous approach to this entire issue, you will probably hear something like, "but we can't let this ruin our way of life." and also, we can't let it create this blanket suspicion about all refugees/asylum-seekers/foreigne rs in germany. much has been made of the

afd, this right-wing populist party that has spots in local government elections. does not have any seats in the german bundestag. what they are not the only ones 'sying that blood is on merkel hands. the polish ruling governing party also has some members that say, this is why we did not go this route. this proves merkel wrong. she is going to get backlash for this refugee thing now. course, certainly, that is very likely. i think the way you have to look at it is that merkel has been in power for 11 years. she asked germans a couple of weeks ago to reelect her for a term. that is probably going to be a taller order now. and one of the reasons is that her whole stock in trade has been, i will keep germany stable and insulated from the world's storms. we saw this in the euro crisis, the debt crisis, and she has

done it in the terrorism -- on the terrorism issue as well. matt: tony, thank you so much. our german government editor. from guy johnson in london and me here in berlin, stay with us. ♪

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>> a suspected terror attack in germany. at least 12 people are dead, 40 are injured after a truck rams a christmas market in erlin. a russian ambassador killed in urkey. this is bloomberg "surveillance." i'm mark barton in for